• Service: Tax, Global Transfer Pricing Services
  • Type: Regulatory update
  • Date: 8/9/2013

Slovakia - Increased focus on transfer pricing documentation, audits 

August 9: Transfer pricing in Slovakia is no longer just a theoretical concept. Taxpayers must regularly provide evidence to support their relevant related-party transactions, are required to maintain documentation, and increasingly must demonstrate compliance with the arm’s length principle for tax audits.


The legal framework and rules regulating transfer pricing in Slovakia are contained in :

  • Article 2 (n–r), Section 17 (5) and 18 of Act no. 595/2003 Coll. on Income Tax
  • Directive of the Ministry of Finance of the Slovak Republic no. MF/8288/2009-72

An additional generally enforced interpretation of transfer pricing and rules for its application are contained in the commentary to Article 9 of the Model Treaty of the OECD and the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations.

Moreover, with respect to the transfer pricing rules, taxpayers also need to take into consideration directives and documents accepted under European Union (EU) law.

Transfer pricing documentation requirements

The requirement to maintain transfer pricing documentation is contained in a directive of the Slovak Finance Ministry (no. MF/8288/2009-72) for tax periods beginning after 31 December 2008. This directive is based on principles established by the OECD and the EU.

According to the Slovak directive, the purpose of transfer pricing documentation is to document a taxpayer’s pricing processes for its mutual business relationships regarding prices for services provided, loans and credit (“monitored transactions”) and other facts that affect the pricing of these transactions.

The transfer pricing documentation establishes that, with respect to a taxpayer’s monitored transactions, the arm’s length principle has been maintained.

During a tax audit, the taxpayer must submit its transfer pricing documentation to the Slovak tax authority within 60 days of a request. Non-compliance may be subject to a penalty of up to €3,000 (with a possibility that the penalty may be applied repeatedly).

Reporting “high-risk transactions”

A taxpayer (i.e., a legal entity) must annually report the valuation of transactions with foreign related parties under appropriate categories (e.g., services, loans, royalties) on its tax return.

This information, together with the information from the taxpayer’s financial statements, may be used by the tax authority to evaluate the probability of non-compliance with the arm’s length principle. The tax authority may look to proportional financial indicators and conduct a comparison with benchmark values (e.g., using a value of a rate of royalties of 5% of turnover, when a greater amount represents a high-risk transaction in the eyes of the tax authority and with respect to a taxpayer potentially subject to a tax audit).

Targeted tax returns are processed electronically, and the calculation and subsequent identification takes place systematically and nationwide.

Overview of transfer pricing activities of the tax authority

Since 2009, a significant portion of the activity of the tax authority has concerned transfer pricing audits. Since 1 January 2013, the reach of the tax authority for selected taxpayers has expanded to cover the entire territory of Slovakia.

Also, manuals for selecting entities for transfer pricing audits and for the practical performance of financial, functional, comparative and economic analysis in the scope of audits of transfer pricing have been compiled. As a result, recent figures show a growing number of tax audits focusing exclusively on transfer pricing.

Read a summer 2013 report [PDF 209 KB] prepared by tax professionals with the KPMG member firm in Slovakia: Horizons (June 2013)

Contact a tax professional with KPMG's Global Transfer Pricing Services.

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